The annual business survey conducted by chartered accountants Ram & McRae has found that companies anticipated a gloomy period next year and were concerned about the management of the economy and investment opportunities for the future.
The survey is the eighth of its kind and includes responses from 43 companies of varying sizes, organisational cultures and products/services offered.
"Even though they were not optimistic about the economy, respondents were generally confident about the prospects of their own businesses," Ram & McRae reported. "The percentage of businesses that expect a fall in turnover is significant and, coming after the modest results for 2001, is a cause for serious concern."
One area of particular concern for businesses was the supply of electricity.
Partner of chartered accountants Ram & McRae, Christopher Ram (centre), media consultant Alex Graham (left), and Momina Walli, deputy head, Entrepreneurial Services and Corporate Finance Department of Ram & McRae at the press briefing on the business outlook survey 2002 yesterday. (Aubrey Crawford photograph).
Ram & McRae partner, Christopher Ram, told a press conference yesterday at Hotel Tower that shortly after the privatisation of the Guyana Electricity Corporation during the 2000 survey, this was a major concern. Two years later it is considered by the companies as of even greater concern and one of the most important operational issues they face.
"Similar to the 2001 survey, there seems to be little and, in fact, waning confidence in the overall management of the economy and in business and investment opportunities for the future," Ram stated. On a weighted average basis, respondents identified lowering direct taxation (69.8%), reducing interest rates (65.1%) and controlling inflation (53.5%) as the issues they most want government to take action on.
The report said other significant causes for pessimism were crime, drugs, the value of the Guyana dollar, management of the economy, smuggling, and government support for business and investment.
"The general picture conveyed by the report is not reassuring. Clearly, much of the optimism conveyed in last year's report, flavoured possibly by the conclusion of elections ahead and anticipation of a period of political stability to come, has turned to pessimism," Ram told reporters.
The survey tracked issues and trends which affect Guyanese businesses, including the level of confidence, globalisation, the state of the economy, the compulsory acquisition issue and the investment code.
Despite the gloomy outlook for the performance of the economy for 2002, 34 of the respondents (83%) indicated that they expected their company's profitability to increase but only 23 (57%) anticipated increases in turnover.
Ram reported that of the 43 respondents, only two companies are very confident about the economy's outlook for 2002, while six companies (13.9%) are fairly confident.
Thirty-four companies (25.6%) were either not confident or not very confident (53.4%) about the prospects of the economy next year. This compared with last year's results when 21 respondents (six percent) were either very confident or fairly confident (36%) about the economy's outlook.
The report said when asked to assess their performance in 2001, 27 respondents (63%) considered theirs to be in line with expectations.
Only two companies (five per cent) considered their performance better than they had projected, while 14 companies (33%) had a decline in their anticipated performance. Of the companies reporting a decline in performance, eight have an annual turnover of over $1 billion, one of between $700 and $1 billion, two of between $600 million and $700 million, one of between $100 million and $200 million, and one with less than $50 million.
These companies operate in a range of industries including distribution/retail, manufacturing, mining, agriculture, financial and services.
Some optimism was expressed over the current PPP/C-PNC/R relationship and the publication of the investment code. The report said respondents showed more confidence in the country's political situation, perhaps due to the dialogue between the leaders of the country's two major political parties.
"One note of optimism consistently expressed, reflects satisfaction with the continuing dialogue between the two leaders of the country's major parties," Ram said. "In last year's survey, respondents viewed this relationship with pessimism."
On the compulsory acquisition of property issue, 76% of the respondents expressed disagreement with government's decision to acquire Toolsie Persaud Ltd's land for development into a market area for street vendors.
Sixty-four per cent or 27 of the companies were in disagreement with the publication of the investment code without legal force. Only two respondents agreed and 13 companies, or 31%, had no views on the issue.
"It is clear that government has failed to communicate its policies and to convince the business community on some of the more critical issues affecting them," commented Ram & McRae in the report.
The report stated that the areas which a significant number of respondents consider likely to impact their businesses in 2002 include consumer spending (33.8%), political stability (33.2%), exchange rate (32.2%), electricity supply and rates (31.8%), and interest rates (31.2%). Respondents identified electricity supply and improving/service quality as the most important issues to their business.
Last year, the preparation of financial information was considered the most important operating issue, but it ranked only third this year.
Just like last year, customs procedures and inventory management were considered important, while environmental issues were considered least important.
Cash flow management, access to capital and timely information were identified as the three most critical financial issues respondents faced. Of less importance were foreign currency availability, debt servicing, and the build-up in receivables.
The report found it surprising that 33 of the companies (79%) indicated that they prepared a formal business plan.
Twenty-two companies (52%) had a change in the size of their workforce in 2001--a smaller percentage compared with 2000. Among those with changes, eight companies (36%) had increases averaging 10.5% and 14 companies (64%) had decreases averaging 17%.
In the event of limited financial resources, respondents intend to cut back on capital investment programmes (41%), advertising and public relations (28.7%), research and development programmes (24%), employment cost (21%), and employment levels (20%).
In order to drive the projected growth of their businesses, 25 respondents plan to raise capital to fund new products/services (36%); to embark on capital expenditure/expansion programme (32%); to re-tool (28%); to fund an acquisition, joint venture or strategic alliance (28%); to expand into new geographic markets (28%); and to re-finance debt (20%). The remaining 41.8% did not plan to raise capital.
The sources of capital that respondents are most likely to use are internally generated funds (28.8%), long-term bank debt (17.6%), disposal of assets (14.5%) and short-term bank debt (15%).
The annual business outlook serves as an assessment of both the country's performance and the mood of the community as well as to provide an insight into Guyana's economic condition.